Invesco (IVZ) Stock Looks Like A Bargain On Fair Value Yet Fully Priced On Sales
Invesco stock has delivered a strong 3 year run, yet the current checks point to a mixed valuation picture where an Excess Returns intrinsic value estimate suggests upside while market based multiples look closer to fair.
- The share price has gained 132.5% over three years, which puts extra focus on whether recent momentum has already captured most of the underlying value in Invesco.
- Growth in the ETF franchise, highlighted by the Invesco S&P 500 Equal Weight ETF reaching US$100b in assets, may support long term cash generation. At the same time, fee cuts and investor redemptions in the Core Real Estate fund keep pressure on margins and capital allocation.
- The stock scores 4 out of 6 on broader valuation checks, which points to a mixed picture rather than a clear bargain or clear overvaluation for Invesco.
The issue now is whether the current price of Invesco already reflects the intrinsic value suggested by the Excess Returns model and recent business developments, or if there is still a reasonable margin between market price and underlying worth.
Spot opportunities beyond Invesco by scanning hand picked 50 high quality undervalued stocks that also pair recent share price strength with mixed valuation signals.Is Invesco Still Cheap on Excess Returns?
The Excess Returns model looks at how much profit Invesco can generate above its cost of equity over time. For Invesco, the inputs suggest a company expected to earn more than its required return on shareholders’ capital, but not at extreme levels.
The model uses a Book Value of $22.56 per share and a Stable EPS of $3.23 per share, with that earnings figure drawn from weighted future Return on Equity estimates. Against a Cost of Equity of $2.50 per share, this leaves an Excess Return of $0.72 per share, supported by an Average Return on Equity of 10.42%. That return profile, combined with a Stable Book Value of $30.95 per share, feeds into an Excess Returns value estimate of about $47.39 per share, which is roughly 32.5% above the current share price. The Invesco S&P 500 Equal Weight ETF hitting US$100b of assets helps explain why the model assumes the company can keep generating meaningful excess returns despite pressure in parts of the real estate platform.
On this Excess Returns view, Invesco stock screens as undervalued relative to its estimated intrinsic worth.
Our Excess Returns analysis suggests Invesco is undervalued by 32.5%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.
Where Does Invesco Sit on Sales?
P/S is a useful lens for Invesco because management fees mean revenue can be a cleaner anchor than accounting earnings at certain points in the cycle.
Invesco trades on a P/S of about 2.0x, which is below the Capital Markets industry average of 3.7x and the peer group level of 8.3x. A tailored fair P/S multiple for Invesco, which factors in its size, profitability profile and risk, is around 1.9x. That sits only slightly under the current 2.0x level, so this framework does not point to a clear discount or premium in the share price.
Even with attention on the ETF franchise after the Invesco S&P 500 Equal Weight ETF reached US$100b in assets, the market P/S multiple for Invesco looks close to what the fundamentals support on these inputs.
On the P/S yardstick, Invesco stock comes across as priced roughly in line with what the model suggests is fair.
See what the numbers say about this price — find out in our valuation breakdown.
The Invesco Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Invesco pick up where this valuation puzzle leaves off and set out what kind of path for growth, margins and earnings would need to play out for the stock to be worth materially more or materially less than today's price. Each narrative connects its number to a specific view on how Invesco's growth, profitability and risk profile could evolve, which you can compare with future results as fresh information arrives on the Community page.
The community is split on Invesco, with one camp leaning into margin and product upside and the other focused on fee pressure and competition risks.
Bull case: 16% undervalued
"The pending conversion of QQQ from a unit investment trust to an open-end ETF along with Invesco's rapid innovation in active and thematic ETFs creates the potential for a surge in net revenue yield and fee income from one of the industry's most recognized brands..."
Read the full Bull Case to see why Invesco could be undervalued
Bear case: 14% overvalued
"Sustained migration from higher-margin active management products to lower-fee passive solutions is eroding Invesco's net revenue yield, which may result in continued margin compression and overall lower earnings even if AUM grows..."
Read the full Bear Case to see why Invesco could be overvalued
Do you think there's more to the story for Invesco? Head over to our Community to see what others are saying!
The Bottom Line
For Invesco, the Excess Returns intrinsic value estimate points to meaningful upside, while the P/S view suggests the stock is already priced close to what current fundamentals justify. That split reflects different emphases, with the intrinsic value lens leaning on cash generation against the cost of equity and the multiple view keyed to how the market rates growth and risk versus peers. With broader checks sitting in a mixed range, the key judgment for investors is whether Invesco can defend and gradually lift margins in areas like ETFs, without fee and redemption pressure in real estate turning the current discount into a value trap.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com